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Greece defies the experts?

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 Bruce Hooker 25 Jan 2015
Well, what's going to happen now? Personally I've no idea.
KevinD 25 Jan 2015
In reply to Bruce Hooker:
> Personally I've no idea.

I doubt anyone does. The intelligent analysts/pundits will be going mystic meg and going for vague comments which could be read multiple ways.
 JJL 25 Jan 2015
In reply to dissonance:

Hmmm. Populus vote for a let up of austerity.

Government tries to borrow, but will find it hard to do so as the primary requirement to receive lending was to maintain tight financial grip.

Government defaults on debt / comes out of euro so can devalue currency to manage debt. Both bad.

I think they will find out within 12 months that they've made a mistake. The people want the lifestyle that they used to enjoy. Unfortunately it was afforded through debt, and now who would lend?
 elsewhere 25 Jan 2015
In reply to JJL:
What's the point of a strong currency if it means 25% unemployment?
A currency that devalues like the drachma did might be right for Greece as they don't balance the books.

 kevin stephens 25 Jan 2015
In reply to Bruce Hooker:

Will the Euro plummet against the pound?
In reply to Bruce Hooker:

> Syriza leader Alexis Tsipras, who has pledged to renegotiate Greece's debt with international creditors, said "today the Greeks wrote history".

That could be very true, could the collapse of the Euro be on the cards?

Coming from a country whose economy shrunk 24% between 2007-2013, and has unemployment currently at around 25% and youth unemployment at 50%, it would seem the only strong hand they have in negotiations is to threaten to default.
In reply to kevin stephens:

> Will the Euro plummet against the pound?

Cheap holidays!
In reply to stroppygob:

A Cheap holiday in other peoples misery!

I don't wanna holiday in the sun
I wanna go to new Belsen
I wanna see some history
'Cause now I got a reasonable economy!

youtube.com/watch?v=2Ah1JM9mf60&
 John Ww 26 Jan 2015
In reply to stroppygob:

I don't understand this bit at all.

 MG 26 Jan 2015
In reply to dissonance:

Surely oraclic?
 Cú Chullain 26 Jan 2015
In reply to Bruce Hooker:

> Well, what's going to happen now? Personally I've no idea.

Nothing too complicated, if they elect to default then they'll cut off the bail out money, No one else will lend to them and the Greeks will have to balance their books overnight. If they thought austerity to date was bad, wait until they default.

That said I would be staggered if they default on their debts. Defaulting would leave them in a worse position than they are now.

They're bluffing to improve their negotiating position. The best they can hope for is a significant write down. They might get one but they don't have as much leverage as they did a few years ago.

The interesting bit will be how Syriza explains this to the public after all their tough talking before the election.

 timjones 26 Jan 2015
In reply to stroppygob:

> Cheap holidays!

That's scant consolation if you produce a product for export to Europe ;(
 neilh 26 Jan 2015
In reply to timjones:

Olive oil. Anything else. Shipping?

As I understand it they still have to finish structural reforms including overcoming that Greeks do not like tax bills .

Its good to see a young looking party. Wonder when all the grey hairs will start appearing?

XXXX 26 Jan 2015
In reply to stroppygob:

So the economy has shrunk 24%, unemployment is 25% and youth unemployment is 50% and you wanted them to vote for more of the same?




Donnie 26 Jan 2015
In reply to stroppygob:

> A Cheap holiday in other peoples misery!

But probably making them a bit less miserable.

Donnie 26 Jan 2015
In reply to Cú Chullain:
Hi there,

I think you're making a common mistake when people talk about what would happen if someone defaults. Which is to look simply one side the two things that lenders think about when they decide whether to lend to someone.

1. Are they trust worthy
2. Can they afford it

People always focus on the first but, on the second point, the defaulters no longer have debt payments so have a lower deficit/higher surplus. Greece is running a surplus without the debt payments right now. Further, on both points, people don't expect anyone to default if they can afford to pay.

So, I think, the real risk is what happens if they leave or get kicked out of the euro, which is a proper nobody knows question. It'll be rubbish but not necessarily more rubbish than now.

Cost of imports will go up, but exports will go up along with demand for Greek for domestic products, from Greeks.

I suspect they'll be just as poor as they are now (for a while) but with less unemployment. Which has to be a good thing.

Interested to hear your thoughts re the above?

Donnie
Post edited at 09:36
 Cú Chullain 26 Jan 2015
In reply to XXXX:

> So the economy has shrunk 24%, unemployment is 25% and youth unemployment is 50% and you wanted them to vote for more of the same?

When your economy has contracted as much as theirs has, then at some point a radical party was always going to gain enough momentum to grab a victory based upon a platform of telling the Eurozone where to go. Syriza just happens to be the one that they got. It could probably just as easily have been a party of the right.

Syriza's room for manoeuvre might not be that great. Weirdly, a clear majority of Greeks still seems to want to stay in the eurozone, even though it (along with their own monumental national profligacy and personal unwillingness to contribute) is one of the chief architects of their current reduced circumstance.
Donnie 26 Jan 2015
In reply to JJL:

> Hmmm. Populus vote for a let up of austerity.

Just to note, austerity's been a massive failure pretty much everywhere it's been implemented.

 Coel Hellier 26 Jan 2015
In reply to Cú Chullain:

> I would be staggered if they default on their debts. Defaulting would leave them in a worse position than they are now.

Why would they be worse off?

Let's assume they default on all debts, pull out of the Euro, and let the Drachma plummet to some low value. Instantly their economy is much more competitive.

Yes, they now have to run a balanced budget, but that's much easier with a more competitive economy, and without having to pay the interest on debts of 360 billion Euros. That's about 20 billion a year in interest alone.

As for people lending to them, well Argentina defaulted on its debts, and a few years later people started lending to them again.

The basic point is that Greek debt of 175 per cent of GDP is not payable, and being in the Euro locks them into a totally uncompetitive economy. They need devaluation and debt write-off in order to stand any chance.

Of course they do have to do other things to reform the economy, including getting people to pay taxes.
 krikoman 26 Jan 2015
In reply to Coel Hellier:
And how do they pay for their food and fuel, neither of which they are anywhere self-sufficient in?
 neilh 26 Jan 2015
In reply to Donnie:

Thats a sweeping statement, can you back it up.
Donnie 26 Jan 2015
In reply to neilh:

Well you really need to follow the debate, which v.sadly isn't reported much in the media. But maybe a sensible way to try to this would be to put the basic argument and see where you disagree -

1. austerity has made the recession worst and longer
2. it wasn't necessary to keep borrowing costs down

Note: re the media not reporting one side of the debate. See this blog post by Simon Wren Lewis and the link to the Independent's political editor. http://mainlymacro.blogspot.co.uk/2015/01/keeping-quiet-about-hidden-motive... The arguments that SWL is making have been made by him and others for years, but the political editor of the independent wasn't aware.

 Cú Chullain 26 Jan 2015
In reply to Coel Hellier:
> Why would they be worse off?

> Let's assume they default on all debts, pull out of the Euro, and let the Drachma plummet to some low value. Instantly their economy is much more competitive.

Your exports are more competitive but your imports become eyewateringly expensive. Greece is not an export led economy, it has a negative balance of trade, it imports way more then they export. Their tourist, some specialist foods, refined petroleum products and shipping industries will do all right but the fact that almost 37% of their imports are made up of crude oil will sink them alone, half their power stations run on imported coal, add to that the increased cost of their next biggest imports, pharmaceuticals, cars, raw materials for manufacturing it paints a bleak picture. Throw in capital flight, hyper inflation and the fact that the EU (their biggest trade partner) will simply not allow not allow Greece to stroll off into the sunset after burning lenders (i.e. German, French, Dutch and UK taxpayers) it gets even more ugly.


> Yes, they now have to run a balanced budget, but that's much easier with a more competitive economy, and without having to pay the interest on debts of 360 billion Euros. That's about 20 billion a year in interest alone.

> As for people lending to them, well Argentina defaulted on its debts, and a few years later people started lending to them again.

At wonga style interest rates, the Argentinian peso is worthless, everyone trades in dollars on the black market there meaning even fewer tax receipts. Ten plus years after defaulting (and nearly defaulting again last year) their 10 year Government bonds have been trading at anything between 8 - 12% (anything above 7% is considered f*cked) and they are still being pursued through the US courts for their 2001 shambles. That is just the macro effect, on a street level life savings were destroyed and pensions made worthless as the cost of buying anything imported soared.

> The basic point is that Greek debt of 175 per cent of GDP is not payable, and being in the Euro locks them into a totally uncompetitive economy. They need devaluation and debt write-off in order to stand any chance.

> Of course they do have to do other things to reform the economy, including getting people to pay taxes.

I agree the current debt arrangement is not sustainable and some kind of haircut needs to be implemented but simply defaulting is not an option for a supposed advanced European country.
Post edited at 11:19
 neilh 26 Jan 2015
In reply to Bruce Hooker:

And now they have formed a coalition with right wing independents. It is laughable.
Removed User 26 Jan 2015
In reply to neilh:

What happens as happened in UK in mid-70s after 1964-1979 Labour government fcukd the country is that control passes from elected Government/Democracy to external bodies (IMF at the time).
This will happen in Greece.
OP Bruce Hooker 26 Jan 2015
In reply to neilh:

It seems curious they formed a coalition with a far right party rather than the Communist party who have more seats. Anyone know the intricacies of Greek politics well enough to explain this?
 Philip 26 Jan 2015
First casualty : Demis Roussos
 neilh 26 Jan 2015
In reply to Removed User:

It happened 5 years ago. The EU already does this.
 timjones 26 Jan 2015
In reply to neilh:

Sorry. I was referring to the problems of exporting from the UK to the Eurozone if the Euro weakens further.
 RomTheBear 26 Jan 2015
In reply to Bruce Hooker:

I hope they manage to negotiate what they want, the more I research this topic the more it looks like the Greeks got massively shafted.

French and German banks lent money irresponsibly to the Greeks, allowing the greeks to buy French and german exports without building up their own economy.
When the shit hits the fan, the eurozone governments effectively bail out the French and German banks by buying the debt of them, and then enforce impossible austerity on Greece.

Basically we are asking the Greeks to pay indirectly for the bailout of the French and German banks via austerity, a debt so big that they mathematically won't ever be able to pay anyway.
 Postmanpat 26 Jan 2015
In reply to Philip:

> First casualty : Demis Roussos

Swiss Franc mortgage?
 BnB 26 Jan 2015
In reply to RomTheBear:

Why are you choosing to ignore the criminal and fraudulent accounting carried out by the Greek government in order to persuade the European banks to make their (admittedly stupid) loans? Certainly the Greek people are not individually responsible for this monumental fraud, but they did elect their representatives and then engaged on a course of high spending and tax avoidance on a scale rare in the developed world. Perhaps they have suffered enough now, but I fear for their well-being if the new government decides to default.
Donnie 26 Jan 2015
In reply to RomTheBear:

Well said.

I think yo highlight what splits people on this kind of issue. Is debt solely the responsibility of the debtor, or do creditors bear some too?



 tony 26 Jan 2015
In reply to BnB:

> Why are you choosing to ignore the criminal and fraudulent accounting carried out by the Greek government in order to persuade the European banks to make their (admittedly stupid) loans?

And the duff accounting that allowed the Greeks to join the Euro. It's generally accepted that they never really met the convergence criteria, but this was overlooked by the powers that were in their enthusiasm to expand the eurozone.
In reply to tony:

I think Goldman Sachs are widely believed to have cooked the books for the Greeks to join the EU

http://www.thebureauinvestigates.com/2012/02/21/how-goldman-sachs-helped-ma...
 Sir Chasm 26 Jan 2015
In reply to RomTheBear:

But Greece shouldn't have been in the eurozone in the first place as they didn't meet the convergence criteria ( they weren't the only ones). And if they can't repay their debt then sooner or later they will inevitably default. Then Germany, sorry, the EU, will have to decide whether to put up with the default and watch other countries do the same or try to eject them from the eurozone.
 Cú Chullain 26 Jan 2015
In reply to RomTheBear:

In fairness Greece has had well over 14 years to re balance its economy since the euro came into effect. Instead of perhaps addressing their trade deficit, reforming their corrupt public institutions and state utilities and making themselves more business friendly to inward investment and tackling endemic tax evasion they instead got drunk borrowing at rates that would have been impossible under the drachma thanks to the effective underwriting of the euro by Germany/France. Also, it is worth remembering that unlike say the UK or Ireland where the financial crises was a result of banking bailouts Greece's downfall has always been its inability to balance its books relying on increased borrowing to pay for the basic running of the state and its bloated public sector while thinking that the party would go on forever and that paying any loans back would be something to deal with tomorrow.
 RomTheBear 26 Jan 2015
In reply to BnB:
> Why are you choosing to ignore the criminal and fraudulent accounting carried out by the Greek government in order to persuade the European banks to make their (admittedly stupid) loans?

Everybody knew that well before 2008 though, and the EU warned about it. It was not any surprise, that did not deter French and German banks from lending way more than they could afford.

Now all the risk sitting on German and French banks’ balance sheets has been shifted to the Eurozone taxpayers, basically France and Germany have indirectly received huge eurozone taxpayer support, but all the blame and austerity has been put on Greece, which seems wholly unfair to me.
Post edited at 14:45
 Coel Hellier 26 Jan 2015
In reply to RomTheBear:

> ... the more I research this topic the more it looks like the Greeks got massively shafted.

Though the Greeks were fully complicit in shafting themselves!

> French and German banks lent money irresponsibly to the Greeks, ...

And, equally, the Greeks borrowed money irresponsibly.
 RomTheBear 26 Jan 2015
In reply to Cú Chullain:

> In fairness Greece has had well over 14 years to re balance its economy since the euro came into effect. Instead of perhaps addressing their trade deficit, reforming their corrupt public institutions and state utilities and making themselves more business friendly to inward investment and tackling endemic tax evasion they instead got drunk borrowing at rates that would have been impossible under the drachma thanks to the effective underwriting of the euro by Germany/France. Also, it is worth remembering that unlike say the UK or Ireland where the financial crises was a result of banking bailouts Greece's downfall has always been its inability to balance its books relying on increased borrowing to pay for the basic running of the state and its bloated public sector while thinking that the party would go on forever and that paying any loans back would be something to deal with tomorrow.

But it was a disguised banking bailout, the troika effectively bailed out French and German banks by taking the bad debts of them. As opposed to the UK or Ireland where the bad loans were written off and then the banks were bailed out by the taxpayer to avoid collapse.
 RomTheBear 26 Jan 2015
In reply to Coel Hellier:
> Though the Greeks were fully complicit in shafting themselves!

No more than the american consumer were complicit in shafting themselves by taking subprime mortgages.
There is no irresponsible borrower without irresponsible lender.

It's completely unreasonable to ask the Greek people to pay alone for what is a disguised bail-out of reckless European banks, plus it's mathematically impossible for them to do so anyway.
Post edited at 15:17
 jimtitt 26 Jan 2015
In reply to Bruce Hooker:

The communists stood for election on a no-coalition basis. They are anyway a)bonkers b) the remnants after an acrimonious split when most left to form one of the parties in Syriza so they probably don´t talk to each other.
 goatee 26 Jan 2015
In reply to Cú Chullain:

Wow I'm impressed. Someone who actually knows something about this issue and is able to make balanced and reasoned arguments. Please keep it coming.
In reply to Cú Chullain:

I think it will be interesting to see how this pans out. Right wing parties will be rubbing their hands together at the prospect of a truely left government monumentally fcking it up. Left wing parties have been pretty quiet about it (well, left as in New Labout left) as they may want to distance themselves until it's clearer which way this is going to go.

Interesting comment from Owen Jones "No wonder so many leftists – from Britain, Spain, France, Italy, and all over Europe – travelled to Athens for this moment."

OP Bruce Hooker 26 Jan 2015
In reply to jimtitt:

Thanks, I wondered if there wan't some reason based on past splits behind it. I read in a newspaper article that the Communists saw Syriza as being not left enough, although last night there was much fist waving and singing of the Internationale. I wouldn't be surprised if it didn't go back a long way. In France the left to the left of the Socialists are taking the Greek elections as a a vindication of their own anti-austerity program. Melenchon was pretty much in depression not long ago, saying he might retire from politics, now he's really chirpy again.
 BnB 26 Jan 2015
In reply to Bruce Hooker:

Hollande swept to power on an anti-austerity ticket and look where France is now...
OP Bruce Hooker 26 Jan 2015
In reply to BnB:

Quite, although France was not in such a mess as Greece is/was. I was just watching a debate on the telly (being retired one does such things at this hour ) and a Greek correspondent who was speaking live from Athens explained quite a few things which I hadn't grasped, according to her the image Syriza has been given outside Greece is somewhat exaggerated, in reality they are the left of the Socialists, ie. left Labour in the UK, and despite the red flags and all they are near Social Democrat than far left.

Their plan is more to reschedule the debt than refuse to pay it and carry out a genuine reorganisation of Greek society, which, according to her, had not been done over the last 4 years, to make the rich pay their taxes and not just cut the wages of the civil servants. This also, would explain why they chose the right wing "sovereignists" rather than the Communists to form their coalition, they do not reject capitalism as such. I can only wish them good luck, although if it were so simple why can't the rest of us do it? Or maybe we can?
 John2 26 Jan 2015
In reply to Bruce Hooker:

I'm amused by all the people complaining that Greece never met the fiscal criteria to join the euro. As I recall, a few years ago people were chuckling about the fact that those feckless Greeks had inflated their GDP by including the proceeds of prostitution and drug dealing, then a few months ago the EU levelled the playing field by insisting that all its members, whether in the euro or not, should include those figures.

It's all pretty amusing, but it's also extremely difficult to take the EU seriously.
 MG 26 Jan 2015
In reply to John2:

You think prostitutes earnings made all the difference?
Douglas Griffin 26 Jan 2015
Donnie 26 Jan 2015
In reply to John2:

I think there's a reasonable argument for including crime etc. in GDP.

GDP contains lots of bad stuff and/or illegal stuff anyway. It would be impossible to take it all out. EU contributions are based on GDP so it would be unfair for countries with relatively more drug dealing and prostitution pay less because their specific bad stuff isn't included in GDP.

So, really, from that perspective it's not stupid, it simply highlights the limitations of GDP as a measure of success. It might be a bit stupid politically though. People with out the time to look into it just think, "what? that's mad that is", giving your UKIPs the opportunity to make lots of political capital.
In reply to XXXX:

> So the economy has shrunk 24%, unemployment is 25% and youth unemployment is 50% and you wanted them to vote for more of the same?

Where did I say I wanted them to vote for anything?
In reply to Philip:

> First casualty : Demis Roussos

Gold!!!
abseil 27 Jan 2015
In reply to goatee:

> Wow I'm impressed. Someone who actually knows something about this issue and is able to make balanced and reasoned arguments....

Yes, it's a shocker in the Pub forum! Stop it! You're making the rest of us look bad.

OK, let's go, get ready to read my threads about nuclear physics and Mongolian politics....

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